Episode 64: Timing The Stock Market, and Protecting Social Security From Nursing Home Bills

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Each month or so, Devin and John devote an episode to answering listener questions. This week, they’ve picked two great questions submitted by listeners like you.

Timing The Stock Market

Devin’s question this month: “Is this a good time to invest?” Such short question, but there’s no short answer. To expand upon that little question, the bigger question is this: Is this a good time to invest, or are we putting our money in right before a big crash happens – right before a decline? Even Devin and John wonder the same thing.

It sounds pretty easy: What if you could just invest and capture mostly the upside? Seems like it should be simple to follow the saying, “Buy low, sell high.” The problem is, timing the market just doesn’t work. Not only do you need to know when to get out when the market is declining, you also need to be right about getting back in when the market is going up.

The only way to do consistently well in the stock market is to stay in the market through the lows and highs.

As Devin always says, “Invest in principles, not predictions.” One of those principles is, “What is the objective for this money?” If you’re not OK seeing your investment decline, then it isn’t money you should be investing. You shouldn’t be investing money that you need in a short-term period, or if you don’t have the stomach to see that particular money suffer a decline as part of normal market behavior.

So, is this a good time to invest? Yes, as long as you are OK with seeing some declines. Over time, Devin believes that the market will continue to go up over time.

Protecting Social Security From Nursing Home Bills

John’s question is common: “Is there any way I can keep a nursing home from taking my Social Security?”

There are a couple of misconceptions in this question. Nursing homes can’t “take” your Social Security, but it might feel that way. If you are in a nursing home, you have a bill each month for your care.

There are two main ways to pay for your care: out of pocket, or with assistance from Medicaid.

If you are paying out of pocket, then in many cases, you’ll be using most or all of your monthly income to pay the bill, including your Social Security benefits. While you may be paying your Social Security benefits to the nursing home, it’s just paying a bill like any other bill.

The other way to pay for a nursing home is Medicaid. Just like other health insurance, you are responsible for a portion of the costs. In the case of long-term care covered by Medicaid, if you’re a single person, your portion of the cost is calculated by taking your gross monthly income, minus the cost of any supplemental health insurance and a small personal needs allowance. As a result, the entire remaining amount of your Social Security benefit is being paid to the nursing home as your co-payment.

However, if you’re married or have other dependents, then the formula changes. Now, the Medicaid formula allows for the supplemental health insurance costs, plus a personal needs allowance, plus what’s called a minimum monthly maintenance needs allowance for the spouse or dependents who are still living at home. The size of that minimum monthly maintenance needs allowance varies between states, and can be adjusted (usually by a court order) to allow for specific situations.

Much of the confusion comes when a nursing home suggests, or strongly suggests, that the Social Security check be directly deposited into their account. From an account management perspective, it makes sense for nursing homes to make this suggestion, because it eliminates the extra steps of having the Social Security benefit deposited and then having to pay the nursing home bill. This can make it seem like the nursing home is “taking” the Social Security benefit, but it’s a little more complicated that than.

Devin and John love answering these questions. Do you have a question for a future Listener Questions episode? Submit it to questions@bigpictureretirement.net.

Highlights include:

  • The $100 bet example
  • How often the market declines 20% or more
  • Devin’s taste in hotels

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